Employers Ins. v. Com., Dept. of Transp.

• Citation: 581 Pa. 381,865 A.2d 825
• Parties: EMPLOYERS INSURANCE OF WAUSAU, a Mutual Company, Appellant v. COMMONWEALTH of Pennsylvania, DEPARTMENT OF TRANSPORTATION, Appellee.
• Decision Date: 18 January 2005
• Court: United States State Supreme Court of Pennsylvania

865 A.2d 825

581 Pa. 381

EMPLOYERS INSURANCE OF WAUSAU, a Mutual Company, Appellant v. COMMONWEALTH of Pennsylvania, DEPARTMENT OF TRANSPORTATION, Appellee.

Supreme Court of Pennsylvania.

Argued May 12, 2004.

Decided January 18, 2005.

Willian Allen Torrance, for Employers Ins. of Wausau, a Mut. Co., appellant.

Christopher Farrell Wilson, for Dept. of Transp., appellee.

Before: CAPPY, C.J., CASTILLE, NIGRO, NEWMAN, SAYLOR, EAKIN and BAER, JJ.

OPINION

Justice BAER.

This case comes before us after the Commonwealth Court, acting within its original jurisdiction, granted preliminary objections and dismissed the claims of Employers Insurance of Wausau (hereinafter Wausau) against the Commonwealth of Pennsylvania, Department of Transportation (hereinafter PennDOT). The issue we must determine is whether the Board of Claims is the proper tribunal to hear claims against the Commonwealth premised upon the doctrines of assignment and equitable subrogation. Based on the following, we reverse and remand with direction that the Commonwealth Court transfer the entire matter to the Board of Claims.

In March of 1999, Jack Lang, d/b/a Lang Construction Company (hereinafter Lang) entered into a contract with PennDOT for the paving and construction of a bridge in Washington County, Pennsylvania. As required by Section 3(a)(2) of the Public Works Contractors' Bond Law of 1967,¹ Lang, as a principal, obtained performance and payment bonds from Wausau as a surety. In accordance with the bond, Wausau and Lang executed a general indemnity agreement that included a provision whereby Lang assigned to Wausau the right to collect all sums due to Lang under the PennDOT/Lang contract, in the event Lang defaulted on its obligation to pay for labor or material used in the fulfillment of that contract.²

Lang subsequently failed upon its obligation to make payments to numerous labor and material suppliers working on PennDOT's project, rendering Wausau, as surety, responsible for such payments. In accordance with its obligation, Wausau discharged the claims and then, by letter dated November 3, 2000, demanded that PennDOT not release further funds to Lang without Wausau's consent.³ Wausau indicated in the letter that it was entitled to make such a demand pursuant to the doctrines of equitable subrogation and assignment, and included a copy of the general indemnity agreement. Nevertheless, PennDOT subsequently released funds directly to Lang. Wausau's unreimbursed losses, based upon PennDOT's payment to Lang after notice of Wausau's claim amounted to $60,470.59, including litigation and adjustment expenses such as attorney fees.

Accordingly, on November 8, 2002, Wausau filed a petition for review in equity in the Commonwealth Court, in its original jurisdiction, to recover from PennDOT the monies it had improperly paid to Lang. In its petition, Wausau asserted in Count I that PennDOT was responsible for payment of the funds pursuant to the doctrine of equitable subrogation. In Count II, Wausau argued that, in the alternative, it had put PennDOT on notice that Lang had assigned the right to receive all contract balances to Wausau, pursuant to the general indemnity agreement between Lang and Wausau precluding PennDOT's payments to Lang. PennDOT filed preliminary objections arguing, inter alia, that the Commonwealth Court lacked subject matter jurisdiction in equity over both Wausau's equitable subrogation claim and assignment claim. Specifically, PennDOT submitted that Wausau's claim for equitable subrogation sounded in negligence, as a claim for monetary damages, and not equitable relief. Further, PennDOT argued that Wausau's assignment claim sounded in assumpsit, and should have been heard by the Board of Claims, as the tribunal having exclusive jurisdiction over claims arising from contracts with the Commonwealth. 72 P.S. § 4651-4.⁴

By Order dated May 2, 2003, the Commonwealth Court sustained PennDOT's preliminary objections, finding that the court lacked subject matter jurisdiction to hear the claims, and dismissed Wausau's petition for review. Specifically, regarding the equitable subrogation claim, the court found that Wausau's remedy was at law, based on monetary damages in the amount of $60,470.59, rendering equity jurisdiction inapplicable. The court noted,

the crux of the controversy is that the Department allegedly mishandled contract proceeds. Regardless of Wausau's choice of words, it has actually alleged negligence by the Department. Wausau's remedy at law is based on monetary damages in the amount of $60,470.59. This legal remedy is full, complete, and adequate under the circumstances. Therefore, this Court does not have jurisdiction over Wausau's petition for review in equity.

Commonwealth Court slip opinion at 5. As for the assignment claim, the court's basis for concluding its lack of jurisdiction necessitating dismissal is unclear. The court cited the relevant paragraphs from PennDOT's preliminary objections asserting that the Board of Claims was the proper tribunal for the claim; but, nevertheless, dismissed the claim, and, with it, Wausau's Complaint.

Thereafter, Wausau timely moved for reargument before the Commonwealth Court requesting that the court transfer the case to the Board of Claims asserting that its action arose from the contract between PennDOT and Lang. The court denied said motion and Wausau appealed to this Court, again contending that the Commonwealth Court erred in dismissing its action without transferring the matter to the proper tribunal, i.e., the Board of Claims.⁵ Because Wausau's petition for review listed two counts for relief, one for equitable subrogation and one as the assignee of the contract between Lang and PennDOT, we will examine whether the Commonwealth Court erred in failing to transfer each particular claim to the Board of Claims pursuant to Pa.R.Civ.P. 213(f), rather than dismissing them.⁶ To determine if each matter should have been transferred to the Board of Claims, we must decide whether the assignment and equitable subrogation claims are contractually based, respectively, and if so, whether they "aris[e] from contracts [ ] entered into with the Commonwealth" for purposes of the Board of Claims enabling statute, Section 4, 72 P.S. § 4651-4 (superseded by 62 Pa.C.S. § 1724).⁷ We turn, initially, to the propriety of the court's dismissal of the assignment claim.

I. Assignment

Wausau asserts that this case clearly arises from a contract entered into with the Commonwealth. Specifically, Wausau posits that any right it may have to collect contract proceeds from PennDOT is based on PennDOT's contract with Lang and arises from Wausau's satisfaction of claims for unpaid supplies of labor and materials provided to Lang for the benefit of PennDOT, as well as Lang's assignment to Wausau of the right to collect such proceeds. PennDOT, to the contrary, argues that this case does not arise from a contract entered into with the Commonwealth. PennDOT asserts that Wausau cannot establish that it was either a party to PennDOT's contract or an intended third party beneficiary, because the Lang/PennDOT contract did not explicitly mention Wausau. We believe Wausau's contentions are correct, and, consequently, disagree with PennDOT.

Wausau's allegation of assignment stems from the general indemnity agreement in which Lang assigned to Wausau the right to collect contract proceeds from PennDOT in the event Lang defaulted on its obligations, under the PennDOT/Lang contract, to third party labor and material suppliers. "An assignment is a transfer of property or some other right from one person to another, and unless in some way qualified, it extinguishes the assignor's right to performance by the obligor and transfers that right to the assignee." Pentlong Corp. v. GLS Capital, Inc., 573 Pa. 34, 820 A.2d 1240, 1249 (2003); see also In re Purman's Estate, 358 Pa. 187, 56 A.2d 86 (1948). The right to receive money due or to become due is generally assignable. In re Noel Coal, Inc., 82 B.R. 778 (Bkrtcy. W.D.Pa.1988). Under the law of assignment, the assignee succeeds to no greater rights than those possessed by the assignor. See Himes v. Cameron County Construction Corp., 497 Pa. 637, 444 A.2d 98, 100 (1982). An assignment will ordinarily be construed in accordance with the rules of construction governing contracts and the circumstances surrounding the execution of the assignment document. See U.S. National Bank v. Campbell, 354 Pa. 483, 47 A.2d 697 (1946); see also Horbal v. Moxham Nat. Bank, 548 Pa. 394, 697 A.2d 577 (1997) (Castille, J., concurring.)⁸

Based on the foregoing, it is clear that under the law of assignment, Wausau stepped into Lang's shoes vis-a-vis PennDOT and, thus, clearly presents a claim sounding in contract. Moreover, despite the fact that Wausau was not mentioned in the PennDOT/Lang contract, we think it is clear that this claim nevertheless falls within the jurisdiction of the Board of Claims, as defined by Section 4 of the Board of Claims Act, 72 P.S. § 4651-4, stating:

"The Board of Claims shall have exclusive jurisdiction to hear and determine all claims against the Commonwealth arising from contracts hereafter entered into with the Commonwealth, where the amount in controversy amounts to $300.00 or more."

The plain language of the statute states that contracts entered into by the Commonwealth are within the exclusive jurisdiction of the Board of Claims. Moreover, the statute is silent regarding the preclusion of the generally permissible assignment of rights described above, nor does the statute identify any restrictions on the non-Commonwealth party preventing them from bringing a claim based upon the assignment of rights. Therefore, because Wausau is effectively instituting a claim against the Commonwealth seeking the enforcement of rights that were created, and assigned, by a contract with the Commonwealth, the Board of Claims is the proper forum to...